ADP Employment Report: Strong Seasonal

Now thisis impressive:

Private-sector employment increased by 297,000 from November to December on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from October to November was revised down but only slightly, from the previously reported increase of 93,000 to an increase of 92,000.

The media is orgasming this morning, but of course the real story here is that we don't know how much of this is seasonal (and will disappear in January) and how much of it constitutes actual permanent employment.

Here's the problem:

According to the ADP Report, employment in the service-providing sector rose by 270,000 in December, the eleventh consecutive monthly gain and the largest monthly increase in the history of the report. Employment in the goods-producing sector rose 27,000, the second consecutive monthly gain and the largest since February 2006. Manufacturing employment rose 23,000, also the second consecutive monthly gain.

Employment among large businesses, defined as those with 500 or more workers, increased by 36,000 while employment among medium-size businesses, defined as those with between 50 and 499 workers, increased by 144,000. Employment among small-size businesses, defined as those with fewer than 50 workers, increased by 117,000.

That's consistent with a lot of seasonal hiring that was reported in December (they're now on the payroll) to handle the Christmas holiday. And most of the hiring was among small- and medium-sized business (which is what you'd expect), not large firms (e.g. Wal-Mart (WMT)).

Yes, I know, it's "seasonally adjusted." What I want to see on Friday is the household data, because that's where we'll see big moves -- if they happened -- in the labor participation rate and the not-in-labor-force numbers.

This is a strong report, without question -- and if we saw it in January (or really any other months than November and December), I'd be impressed. As it stands with the anomalous reports (compared to my expectations) coming into the season, I'm reserving judgment.

It appears the market is a bit skeptical that this is more than seasonal hiring as well -- that we're not up 20 handles on the ES futures following the report; the move was +4 from where it was prior to the report ... which certainly isn't what you'd expect with a "surprise" of this magnitude.